Overview

BTA Bank and Alliance Bank, two of Kazakhstan's four largest banks, have been in international headlines for almost a year due to their precarious financial positions. It can be said that these banks still exist today only because of the Kazakhstan government's "too big to fail" policy toward them. The Kazakhstan government has now imposed a deadline on BTA Bank to complete its debt restructuring by September 18, 2009, notwithstanding the negative impact on the country’s reputation in the eyes of Western investors.

It has become apparent to the Kazakhstan government that the current legal framework surrounding the insolvency of banks does not provide adequate tools to restructure the financial indebtedness of ailing banks without the consent of all (including dissenting) creditors. It is within this problematic context that the Kazakhstan government has taken steps to substantially revise its bank insolvency legislation. A new bill,2 which came into force on August 30, 2009 (the "Restructuring Law"), has been rushed through the Parliament and is expected to allow the state to quickly restructure the debt of a distressed bank and bind dissenting creditors.


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